VIENNA - World powers will seek to finalize an agreement with Iran next week on processing its uranium abroad to help allay Western fears it is developing nuclear weapons.

But Iran has dampened Western expectations it is ready to seal the deal. Time is on our side, a senior Iranian official said. Tehran would send junior officials rather than its nuclear energy chief to the talks starting on Monday in Vienna, he said.

The International Atomic Energy Agency was ready for up to three days of talks on its premises but no one knew how long they would run, a diplomat close to the U.N. watchdog said.

Iran won itself a reprieve from the threat of harsher U.N. sanctions by engaging six powers in rare high-level talks on October 1 in Geneva that opened the door to detente over its disputed nuclear program after a seven-year standoff.

Iran stuck to its refusal to curb uranium enrichment. But it made two gestures of transparency that the powers touted as a basis for further steps they say Iran should make to disprove suspicions of a clandestine agenda to develop nuclear weapons.

Iran granted U.N. inspections at a hitherto hidden uranium enrichment site, and agreed in principle to have Iranian uranium processed in Russia and France for use by a Tehran reactor that makes cancer-care isotopes but is running out of imported fuel.

Two days later, IAEA chief Mohamed ElBaradei pinned down October 25 to start surveillance of the site near Qom.

The United States, Britain, France and Germany indicate they will pursue sanctions targeting Iran's vital oil sector if the diplomacy begun in Geneva does not get Iran to temper and open up its nuclear program to scrutiny by the end of this year.

The Vienna talks to flesh out technical and legal aspects of the uranium proposal will be the first chance for Iran to make good on new prospects for nuclear cooperation raised in Geneva.
But the proposal faces pitfalls due to differences over exactly what was agreed on October 1 and what each side wants out of the deal, and Iran's continued refusal to curb enrichment.

Western diplomats said Iran assented in principle to sending about 80 percent of its declared stockpile of low-enriched uranium (LEU) to Russia for further refinement, then on to France for fabrication into fuel assemblies.

The material would then be returned for use by the Tehran reactor to replace fuel, obtained from Argentina in 1993 but set to run out in about a year, in a form resistant to being enriched to a very high -- or weapons-grade -- degree.

For world powers, the deal's benefit lies in greatly cutting Iran's LEU stockpile. This has no apparent civilian use since Iran has no operating nuclear power plants, but is enough to fuel one atomic bomb, if Tehran chose to purify it further.

Iran, which says it is enriching uranium only for future electricity, would save its medical isotope production despite sanctions that make it hard for it to import nuclear materials.

WIN-WIN DEAL? IRAN HESITATES

Russian, French, U.S. and IAEA officials want to wrap up key conditions with Iran next week, including a timetable and anti-proliferation guarantees once Iran recovers the material.

French officials said the deal should entail Iran shipping out all 1.2 tonnes of the LEU before the end of this year.

This is a win-win deal, a real opportunity for Iran to turn around perceptions of its nuclear behavior, so they ought to take the commitment they made in Geneva seriously, said a senior Western diplomat close to the negotiations.
But Tehran has signaled it may not be prepared to make binding decisions next week by not sending Ali Akbar Salehi, the nuclear energy program chief.

Tehran has also denied tentatively agreeing to any details of the plan in Geneva. It said it was also looking into buying the needed fuel abroad, and warned it could enrich to higher levels itself if a deal could not be done with the powers.

We have conditions and suggestions that need to be discussed, a senior Iranian nuclear official said.

He suggested strongly that these issues would take longer to resolve, without saying how long or what Iran had in mind.

Diplomats said Iran seemed to be again employing a savvy strategy of ambiguity to draw out dialogue, keeping deal-making channels open to give Russia and China enough political cover to continue blocking tougher U.N. sanctions against Tehran.

More importantly, Iran would be buying time to achieve its industrial enrichment ambitions and overcome technical barriers.

Shoring up Iran's position, China said on Wednesday only practical cooperation and close coordination with Iran could resolve nuclear issues peacefully. Russia deflected a U.S. attempt in talks to obtain commitments to broader sanctions if Iran did not live up to new expectations of cooperation.

The uranium deal may not mean much in the longer run unless the Islamic Republic caps or halts enrichment -- to lock in the non-proliferation gains accrued from shipping LEU abroad.

But Iran rules out any freeze or suspension of enrichment activity as an offence to national pride and sovereignty.
The major powers will press Iran on that issue at the next round of high-level diplomatic negotiations due in late October.

(Additional reporting by Parisa Hafezi in Tehran and Estelle Shirbon in Paris; Editing by Ralph Boulton)

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